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Hologram-based security fights counterfeit sports merchandise

Hologram-based security fights counterfeit sports merchandise
Hologram, packaging, brand security

Holograms score for sports1With licensed sports merchandise continuing to grow as a major revenue source for trademark owners, it has become an all-too-tempting target for counterfeiters. As unscrupulous vendors grow bolder and more sophisticated in their methods, security countermeasures must also keep pace in the ongoing war to protect intellectual property.


For this reason, sports merchandising licensors increasingly rely on hologram-based security tags. This technology can provide robust security at a relatively reasonable cost, for a wide range of applications. But the technology can also present significant pitfalls for the unwary.

The world's largest sporting events are the summer and winter Olympics and the Fédération Internationale de Football Association (FIFA) Football World Cup. Virtually every Olympics event since the Atlanta Games in 1996 has had its licensed product merchandise—from caps, T-shirts and tracksuits to books, programs, badges, bags, scarves and toys—protected and tracked with holographic technology.

Most recently among these was the Beijing Olympic Games, where visitors were advised that the best way to avoid counterfeits was to buy Olympic merchandise only at licensed stores. There, they were able to find inside the packaging of all of the licensed products an anti-counterfeiting label featuring a small security hologram attached to an official Olympic Games' emblem.

And this tradition, established in Atlanta more than 13 years ago, is to be carried forward at least until 2012 because the organizing committee of the London Olympics has indicated that all the merchandise on sale will be subject to anti-counterfeit tagging, which historically has been in the form of holograms affixed to labels or tags.

For the 2010 Winter Games in Vancouver, the merchandise has recently gone on sale, complete with holographic security measures.

The official merchandise for that other great sporting occasion, the FIFA World Cup, will also continue to benefit from holographic technology. This was first used for the World Cup in 1998 in France, followed by the 2002 World Cup in Tokyo and Seoul and then in 2006 in Germany. The supplier to the latter, De La Rue Holographics, has recently been re-selected to provide protection for the merchandise for the 2010 World Cup, which is being held in South Africa.

Benefits for all

The solutions offered by holographic companies are similar in concept. They comprise not only the production of uniquely numbered security labels and hangtags complete with holograms, but increasingly a range of other security features as well. They also include important fulfillment and tracking services.

These labels and data on the quantities provided to each, including the unique number of each label, are provided to the licensors who then bill the licensees (the contracts generally involve an initial license fee and then a royalty per item of merchandise sold).

This system offers benefits to both parties. It enables the licensor to protect the brand, which is not only an important marketing tool for raising awareness and generating loyalty, but is also a major revenue earner. It enables them to collect the royalty payments from their licensees based on the number of labels purchased and hence the number of merchandise intended for sale.

Holographic security provides a strong deterrent for preventing not only counterfeiting but also grey-market diversion, as under reporting becomes highly visible and out of territory sales are easily traceable. And, through the use of enforcement teams, the authenticity of official merchandise can be checked and verified in the field.

But a cautionary word. Although all of this offers great opportunities for a security provider, the financial success of any contract can be as uncertain as the event itself. The provider is usually granted a nonexclusive license to provide labels and hang-tags, but all other licensees will be referred to the supplier for these security features.

Holograms score for sports2The downside of this arrangement is that the quantity of labels and tags cannot be guaranteed—a situation exacerbated by the right of the licensor to exempt certain licensees at the last moment. This can be particularly true of printed materials such as event programs, which may, or may not be required to have a secure label applied.


There may also be geopolitical forces that influence the success of the effort for the security supplier. For example, Women's World Cup Soccer in 2003 was to have been held in Beijing but the event was devastated by the outbreak of SARS in China. The switch of venue to the U.S. had a serious impact on all licensees, many of which had already produced shirts, caps, pins, etc., with the Beijing logo. Overall, it is unlikely that anyone profited from the licensing arrangements at this event. The ever-present threat of boycotts also adds to the risk factor.

Matters can also be further complicated at events where teams are knocked out of the competition. At some point, demand will change very rapidly according to the victory or defeat of the participating teams. The Football World Cup, Rugby World Cup and Cricket World Cup are prime examples of this, as opposed to ongoing programs and events such as those held by European and U.S. leagues.

The sheer complexity of supplying a myriad of different licensees with a number of different manufacturing locations poses significant challenges not normally encountered in conventional supply contracts. As an example, the 2006 FIFA World Cup involved 170 licensees and the delivery of labels and hang-tags to 400 different locations worldwide.

The 2004 Olympics, meanwhile, involved 19 licensees and two international sponsors, between them producing 35 categories of products with 4,000 different item references. Each of these was protected by one of eight different types of authentication label or tag and sold though 12,000 different retail outlets.

The only way for suppliers to deal with such uncertainties and complexities is to ensure their manufacturing and delivery systems are nimble. Ideally, the label and tags should be produced on-demand so that inventory levels are kept to a minimum. Other licensees are doing the same thing and might be manufacturing anywhere in the world. They expect delivery of the labeling within 24 to 48 hours maximum so that freight costs can run extremely high unless there are local stockpiles.

A further frustrating aspect impacting directly on production costs is run length. The dream of every manufacturer is long runs of few SKUs. Unfortunately, the wide variety of merchandise dictates the need for labels of various sizes plus a tag.

Clever licensees will often request the smallest size label on the grounds that it must be cheaper, while major sponsors such as Nike, Adidas and Reebok might request a tag customized to their own design. Pity the supplier who attempts to argue with a licensee who is also contributing several million dollars in sponsorship to the event under consideration.

The successful supplier may also be required by the licensor to service licensees in their own languages and currencies. Both of these can be unwieldy constraints, particularly as label and tag supply can begin two years before an event requiring some position to be taken on exchange rates.

Successful applications

Although these many nuances of holographic label implementation can be significant, overall they don't detract from the fundamental impact the technology has had on thwarting counterfeiters. In addition to the Olympics and FIFA World Cup, on both sides of the Atlantic and around the world, there have been some great examples of hologram innovation to ensure that bona fide sports merchandise stands out from the fakes.

One of the biggest and most glamorous sports on the planet, Formula One motor racing, uses holography to protect its treasured brand identity, with many of the top racing teams now featuring security holograms to guard official merchandise from counterfeiting.

Ferrari is one the more notable examples among Formula One teams. The famous Italianmarque has produced a fountain pen and metal case giftset featuring a hologram and an official logo as a mark of authenticity.

In the UK, De La Rue Holographics, working for Copyright Promotions Sport (CPS), provides a highly secure brand authentication solution for The Football Association, enabling it to track and manage the England Three Lions brand once it has been licensed, protecting it against the threats of counterfeiting, grey-market diversion and piracy.

There's little surprise to learn that it was in the U.S. major sporting leagues where the sports merchandising industry we see today really took off at the beginning of the 1990s.

Today, all the major U.S. leagues have embraced holography to varying degrees to protect reputation, brand image and, importantly, revenue streams. The big four: the National Football League; Major League Baseball; the National Basketball Association and the National Hockey League all have successful licensed product-protection programs to monitor royalty income while a number of the smaller leagues, such as soccer, have followed suit.

The annual turnover in licensed merchandise sales runs to several billion dollars within the American major leagues. Furthermore, Sports Business Simulation (SBS) reports that the size of the sports business industry overall reaches an estimated value of $213 billion—that's twice the size of the U.S. auto industry and seven times the size of the movie industry. In that context, it only stands to reason that trademark protection should be a high priority.

Holograms score for sports3The NFL leads revenue values with an annual income in excess of $2.5 billion. The Super Bowl is one of the biggest annual sporting events in North America, with a global audience that generates hundreds of millions of dollars in spinoff sales and promotions. So it's no wonder that the game's administrators have moved to thwart ever more sophisticated counterfeiters keen to capitalize on this market with the introduction of licensed merchandise featuring serialized holograms as the key authentication device in track-and-trace programs.


In terms of revenue, the NFL is followed by MLB, with revenues of $2.3 billion. NASCAR, the NBA, the NHL and other leagues, teams and sports together generate $5.6 billion. All have lucrative official merchandising programs protected by hologram-based security tagging systems.

Even college sports generate enough merchandise sales to justify dedicated protection programs. The National Collegiate Athletic Association (NCAA) is the largest collegiate athletic organization in the world that organizes the athletic programs of many colleges and universities in the U.S. and Canada.

Successful applications

Although merchandising programs follow a similar pattern, there are variations in the form and technology deployed that the labels and hang-tags take. In the U.S., for example, holograms are supplied mainly as self-adhesive labels or as printed labels with pressure-sensitive stripes or patches.

In the early days, the application of these measures was relatively crude, with little thought paid to the overall esthetics of the finished product. But this is now changing and the integration of the hologram with the printed label is becoming more apparent. A good example is the new holographic label produced for MLB merchandise. This features a raised stitch-like feature printed to-register over the hologram, which simulates stitching on regulation baseballs.

This integration has also been the case in Europe, where the hologram has traditionally been applied as hot-stamping foil. This in itself is generally considered to be highly secure, as well as enabling great visual assimilation with the rest of the label.

In virtually all cases, the visual security of the hologram is complemented by a range of additional security features, both overt and covert. This provides several layers or levels of security for consumers, retailers, licensors, and law enforcers to authenticate.

The most extreme case of this was the hang-tags for the Beijing Olympics. The event's holographic security, in the form of a windowed thread, was integrated with a number of other measures. These additional protections included measures more commonly used to protect currency.

This level of sophistication was perhaps not surprising; China is a major source of counterfeit products and the tags were produced by state-owned China Banknote Printing and Minting Corp. But it remains to be seen whether this sets a trend for future security labels for sporting merchandise. Security labeling and tagging that uses holography is firmly established as an iconic symbol of authenticity and has proven its worth for many years in safeguarding several billion dollars worth of merchandise and brand reputation.

Issued on behalf of the IHMA by Mitchell Halton Watson Ltd. For further details contact Andy Bruce on 44 (0) 191 233 1300 or email[email protected]


More information is available:
International Hologram Mfs. Association Ltd., 44 (0) 1932 785680. www.ihma.org
China Banknote Printing and Minting Corp., 86 28 82995999. www.cbpm.com.cn/english/ssqy.htm
De La Rue Holographics, 44 (0)1256 463000. www.delarue.com

 

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